U.S. stocks plummeted Wednesday in a global stampede toward investments perceived as capable of withstanding a severe European downturn, or worse.

The day's capitulation began when the amount of interest needed to sell 10-year bonds of Italy, the world's eighth largest economy and the third largest in Europe, blew past seven percent.

No developed nation whose 10-year notes have carried a yield that high have ever survived without an external rescue. Such was the case with Portugal and Ireland and is currently the case with Greece.

But Italy's economy, which is burdened by a nearly $2.7 trillion debt, is bigger than Portugal, Ireland, Greece and Spain combined.

 The problem with Italy is that it is too big to save and too big to fail given the system risks to the banking sector, David A. Rosenberg, chief economist and strategist, Gluskin + Sheff Associates Inc., said in a client note.

Italy's soaring bond yields would have been even higher if not for massive support from the European Central Bank.

Italian bonds are essentially serving as another fear index like the VIX, and right now they're reflecting a lot of fear, Charles Reinhard, deputy chief investment officer at Morgan Stanley Smith Barney in New York, told Reuters.

Investors were already on tenterhooks over Italy's inability to find a leader capable of gaining the market's trust and Greece's inability to find a head of state to accept bailout money and impose yet more austerity on the debt-choked nation.

But the Italian bond yield blowout started a stampede out of stocks and euro-denominated assets.

The Dow Jones Industrial Average plunged 389.24 points, or 3.2 percent, to 11,780.94. At one point it was down more than 418 points.

The Nasdaq Composite tumbled 105.84 points, or 3.9 percent, close at 2,621.65 and the S&P 500 ended the day down 46.81, or 3.7 percent, to 1,229.11. All 10 S&P sector were down.

Both France's CAC 40 and Germany's DAX stock indexes closed down 2.2 percent. Italy's main stock market index closed down 3.8 percent.

The euro fell to a four-week low -- the most it has fallen against the dollar in 15 months -- and the greenback soared 1.7 percent.

The yield on 10-year U.S. Treasuries fell to 1.95 percent. Bond yields move in the opposite direction of their price so falling yields indicates increased purchases of the bonds.

The equity route may continue Thursday as signs proliferate that the contagion is reaching Europe's core. The difference in yields between the 10-year French government bond and 10-year German government bonds, which one year ago was 0.45 percentage points, climbed Wednesday to a Eurozone-era record of 1.47 percentage points.